GovernmentType: Constitutional democracy. Independence: November 3, 1903. Constitution: October 11, 1972; amended 1983 and 1994 and reformed in 2004. Branches: Executive--president (chief of state), two vice presidents. Legislative--Legislative Assembly (unicameral, 78 members). Judicial--Supreme Court. Subdivisions: Nine provinces and five (Indigenous) territories. Political parties: Former President Mireya Moscoso belonged to the Arnulfista Party (PA). The PA in coalition with smaller parties held a slim majority in the Legislative Assembly. The Democratic Revolutionary Party (PRD) was the primary opposition. Represented by its presidential candidate, Martin Torrijos, the PRD on May 2, 2004 won the presidency and a legislative majority and took power on September 1, 2004.Suffrage: Universal at 18.

PEOPLEPanamanians' culture, customs, and language are predominantly Caribbean Spanish. The majority of the population is ethnically mestizo or mixed Spanish, Indigenous, Chinese, and West Indian. Spanish is the official and dominant language; English is a common second language spoken by the West Indians and by many businesspeople and professionals. More than half the population lives in the Panama City-Colon metropolitan corridor.

Panama is rich in folklore and popular traditions. Brightly colored national dress is worn during local festivals and the pre-Lenten carnival season, especially for traditional folk dances like the tamborito. Lively salsa--a mixture of Latin American popular music, rhythm and blues, jazz, and rock--is a Panamanian specialty, and Ruben Blades its best-known performer. Indigenous influences dominate handicrafts such as the famous Kuna textile molas. Artist Roberto Lewis' Presidential Palace murals and his restoration work and ceiling in the National Theater are well known and admired.

More than 65,000 Panamanian students attend the University of Panama, the Technological University, and the University of Santa Maria La Antigua, a private Catholic institution. Including smaller colleges, there are 14 institutions of higher education in Panama. The first six years of primary education are compulsory, and there are about 357,000 students currently enrolled in grades one through six. The total enrollment in the six secondary grades is about 207,000. More than 90% of Panamanians are literate.

HISTORYPanama's history has been shaped by the evolution of the world economy and the ambitions of great powers. Rodrigo de Bastidas, sailing westward from Venezuela in 1501 in search of gold, was the first European to explore the Isthmus of Panama. A year later, Christopher Columbus visited the Isthmus and established a short-lived settlement in the Darien. Vasco Nunez de Balboa's tortuous trek from the Atlantic to the Pacific in 1513 demonstrated that the Isthmus was, indeed, the path between the seas, and Panama quickly became the crossroads and marketplace of Spain's empire in the New World. Gold and silver were brought by ship from South America, hauled across the Isthmus, and loaded aboard ships for Spain. The route became known as the Camino Real, or Royal Road, although it was more commonly known as Camino de Cruces (Road of the Crosses) because of the abundance of gravesites along the way.

Panama was part of the Spanish empire for 300 years (1538-1821). From the outset, Panamanian identity was based on a sense of "geographic destiny," and Panamanian fortunes fluctuated with the geopolitical importance of the Isthmus. The colonial experience also spawned Panamanian nationalism as well as a racially complex and highly stratified society, the source of internal conflicts that ran counter to the unifying force of nationalism.

Building the CanalModern Panamanian history has been shaped by its transisthmian canal, which had been a dream since the beginning of Spanish colonization. From 1880 to 1890, a French company under Ferdinand de Lesseps attempted unsuccessfully to construct a sea-level canal on the site of the present Panama Canal. In November 1903, with U.S. encouragement, Panama proclaimed its independence and concluded the Hay/Bunau-Varilla Treaty with the United States.

The treaty granted rights to the United States "as if it were sovereign" in a zone roughly 10 miles wide and 50 miles long. In that zone, the U.S. would build a canal, then administer, fortify, and defend it "in perpetuity." In 1914, the United States completed the existing 83-kilometer (52 mile) lock canal, which today is one of the world's greatest engineering triumphs. The early 1960s saw the beginning of sustained pressure in Panama for the renegotiation of this treaty. (See discussion of U.S.-Panama relations and the 1977 Panama Canal Treaties below.)

Military Coups and CoalitionsFrom 1903 until 1968, Panama was a constitutional democracy dominated by a commercially oriented oligarchy. During the 1950s, the Panamanian military began to challenge the oligarchy's political hegemony. In October 1968, Dr. Arnulfo Arias Madrid, twice elected president and twice ousted by the Panamanian military, was ousted for a third time as president by the National Guard after only 10 days in office. A military government was established, and the commander of the National Guard, Brigadier General Omar Torrijos, soon emerged as the principal power in Panamanian political life. Torrijos' regime was harsh and corrupt, but his charisma, populist domestic programs, and nationalist (anti-U.S.) foreign policy appealed to the rural and urban constituencies largely ignored by the oligarchy.

Torrijos' death in 1981 altered the tone but not the direction of Panama's political evolution. Despite the 1983 constitutional amendments, which appeared to proscribe a political role for the military, the Panama Defense Forces (PDF), as they were then known, continued to dominate Panamanian political life behind a facade of civilian government. By this time, General Manuel Noriega was firmly in control of both the PDF and the civilian government.

The United States froze economic and military assistance to Panama in the summer of 1987 in response to the domestic political crisis in Panama and an attack on the U.S. Embassy. General Noriega's February 1988 indictment in U.S. courts on drug trafficking charges sharpened tensions. In April 1988, President Reagan invoked the International Emergency Economic Powers Act, freezing Panamanian Government assets in U.S. banks and prohibiting payments by American agencies, firms, and individuals to the Noriega regime. When national elections were held in May 1989, Panamanians voted for the anti-Noriega candidates by a margin of over three-to-one. The Noriega regime promptly annulled the election and embarked on a new round of repression. By the fall of 1989 the regime was barely clinging to power, and the regime's paranoia made daily existence unsafe for American citizens.

On December 20, 1989, President George H.W. Bush ordered the U.S. military into Panama to protect U.S. lives and property, to fulfill U.S. treaty responsibilities to operate and defend the Canal, to assist the Panamanian people in restoring democracy, and to bring Noriega to justice. The U.S. troops involved in Operation Just Cause achieved their primary objectives quickly, and troop withdrawal began on December 27, 1989. Noriega eventually surrendered voluntarily to U.S. authorities. He is now serving a 40-year sentence for drug trafficking in Miami.

Rebuilding DemocracyPanamanians moved quickly to rebuild their civilian constitutional government. On December 27, 1989, Panama's Electoral Tribunal reinstated the results of the May 1989 election and confirmed the victory of opposition candidates under the leadership of President Guillermo Endara and Vice Presidents Guillermo Ford and Ricardo Arias Calderon.

President Endara took office as the head of a four-party minority government, pledging to foster Panama's economic recovery, transform the Panamanian military into a police force under civilian control, and strengthen democratic institutions. During its 5-year term, the often-fractious Endara government struggled to meet the public's high expectations. Its new police force proved to be a major improvement in outlook and behavior over its thuggish predecessor but was not fully able to deter crime. Ernesto Perez Balladares was sworn in as President on September 1, 1994, after an internationally monitored election campaign.

Perez Balladares ran as the candidate for a three-party coalition dominated by the Democratic Revolutionary Party (PRD), the erstwhile political arm of the military dictatorship during the Torrijos and Noriega years. A long-time member of the PRD, Perez Balladares worked skillfully during the campaign to rehabilitate the PRD's image, emphasizing the party's populist Torrijos roots rather than its association with Noriega. He won the election with only 33% of the vote when the major non-PRD forces, unable to agree on a joint candidate, splintered into competing factions. His administration carried out economic reforms and often worked closely with the U.S. on implementation of the Canal treaties.

On May 2, 1999, Mireya Moscoso, the widow of former President Arnulfo Arias Madrid, defeated PRD candidate Martin Torrijos, son of the late dictator. The elections were considered free and fair. Moscoso took office on September 1, 1999. During her administration, Moscoso attempted to strengthen social programs, especially for child and youth development, protection, and general welfare. Education programs also were highlighted. Moscoso's administration successfully handled the Panama Canal transfer and was effective in the administration of the Canal.

National elections were held again on May 2, 2004. The PRD's Martin Torrijos won the presidency and a PRD legislative majority in the National Assembly. Torrijos was inaugurated on September 1, 2004. Torrijos ran his campaign on a platform of "zero tolerance" for corruption, a problem endemic to the Moscoso and Perez Balladares administrations. Since taking office, Martin Torrijos has passed a number of laws making the government more transparent. He formed a National Anti-Corruption Council whose members represent the highest levels of government, as well as civil society, labor organizations, and religious leadership. In addition, many of his closest Cabinet ministers are non-political technocrats known for their support for the Torrijos government's anti-corruption aims.

GOVERNMENT AND POLITICAL CONDITIONSPanama is a representative democracy with three branches of government: executive and legislative branches elected by direct vote for 5-year terms, and an independently appointed judiciary. The executive branch includes a president and two vice presidents. The legislative branch consists of a 78-member unicameral National Assembly. The Constitution was changed in 2004, however, and beginning with national elections in 2009, the executive branch will have only one vice president, and the membership of the National Assembly will be capped at 71. The judicial branch is organized under a nine-member Supreme Court and includes all tribunals and municipal courts. An autonomous Electoral Tribunal supervises voter registration, the election process, and the activities of political parties. Anyone over the age of 18 may vote.

NATIONAL SECURITYThe Government has converted the former PDF into the Panamanian Public Force (PPF), a "law enforcement focused" force that is subordinate to civilian authority, composed of four independent organizations: the Panamanian National Police (Policia Nacional de Panam� or PNP), National Maritime Service (Servicio Maritimo Nacional or SMN), the National Air Service (Servicio A�reo Nacional or SAN), and the Institutional Protectional Service (Servicio de Protecci�n Institucional or SPI). A constitutional amendment passed in 1994 permanently abolished the military.

Law enforcement units that are separated from the PPF, such as the Technical Judicial Police, also are directly subordinate to civilian authorities. The PPF budget, in contrast to the former PDF, is on public record and under the control of the executive.

Principal Government OfficialsPresident--Martin TORRIJOSFirst Vice President--Samuel LEWIS NavarroSecond Vice President--Rub�n AROSEMENAMinistry of Foreign Affairs--Samuel LEWIS NavarroAmbassador to the United States--Federico Ant�nio HUMBERT Arias Ambassador to the United Nations--Ricardo Alberto ARIASAmbassador to the Organization of American States—--Aristides ROYO

Panama maintains an embassy in the United States at 2862 McGill Terrace, NW, Washington, DC 20008 (tel: 202-483-1407).

ECONOMYPanama's economy is based primarily on a well-developed services sector that accounts for nearly 80% of GDP. Services include the Panama Canal, banking, the Colon Free Zone, insurance, container ports, flagship registry, medical and health, and other business.

A major challenge facing the government under former President Mireya Moscoso was turning to productive use the 70,000 acres of former U.S. military land and the more than 5,000 buildings that reverted to Panama at the end of 1999. Administratively, this job falls to the Panamanian Inter-Oceanic Regional Authority whose mandate will end on December 31, 2005. In January 2005, the Torrijos Administration passed a comprehensive fiscal reform bill. One of the biggest challenges facing the GOP is the reform of Panama's actuarially bankrupt social security system. The GOP is also seriously considering undertaking a major $4-7 billion expansion of the Panama Canal, but a national referendum, required by Panama's Constitution, has not yet been scheduled.

GDP growth for 2004 was approximately 6.2% compared to 4.3% in 2003. Though Panama has the highest GDP per capita in Central America, about 40% of its population lives in poverty.

Panama has bilateral free trade agreements with El Salvador and Taiwan. Panama is continuing free trade negotiations with the four remaining Central American countries and Mexico, although many of these are on hold. Panama is also negotiating bilateral free trade agreements with the United States and Singapore. From March 2001 to February 2003, Panama served as host for the Free Trade Area of the Americas negotiations.

FOREIGN RELATIONS Panama is a member of the UN General Assembly and most major UN agencies and has served three terms as a member of the UN Security Council. It maintains membership in several international financial institutions, including the World Bank, the Inter-American Development Bank, and the International Monetary Fund.

Panama is a member of the Organization of American States and was a founding member of the Rio Group. Although it was suspended from the Latin American Economic System--known informally both as the Group of Eight and the Rio Group--in 1988 due to its internal political system under Noriega, Panama was readmitted in September 1994 as an acknowledgment of its democratic credentials.

Panama also is one of the founding members of the Union of Banana Exporting Countries and belongs to the Inter-American Tropical Tuna Commission. Panama is a member of the Central American Parliament as well as the Central American Integration System. Panama joined its six Central American neighbors at the 1994 Summit of the Americas in signing the Alliance for Sustainable Development known as the Conjunta Centroamerica-USA or CONCAUSA to promote sustainable economic development in the region.

U.S.-PANAMANIAN RELATIONSThe United States cooperates with the Panamanian Government in promoting economic, political, security, and social development through U.S. and international agencies. Cultural ties between the two countries are strong, and many Panamanians come to the United States for higher education and advanced training. About 25,000 American citizens reside in Panama, many retirees from the Panama Canal Commission and individuals who hold dual nationality. There is also a rapidly growing enclave of American retirees in the Chiriqui Province in western Panama.

Panama continues to fight against the illegal narcotics and arms trade. The country's proximity to major cocaine-producing nations and its role as a commercial and financial crossroads make it a country of special importance in this regard. Panama's counter narcotics cooperation with the U.S. has been excellent. The Panamanian Government has concluded with the U.S. maritime agreements on counter terrorism and counter narcotics, and a stolen vehicles agreement. The Panamanian Government also has been paying increasing attention to other maritime security issues. In the economic investment arena, the Panamanian Government has been successful in the enforcement of intellectual property rights and has concluded a Bilateral Investment Treaty Amendment and an agreement with the Overseas Private Investment Corporation with the United States. Although money laundering remains a problem, Panama passed significant reforms in 2000 intended to strengthen its cooperation against international financial crimes, and the conclusion of the Speed Joyeros case in April 2002 marked the dismantling of a major money-laundering network with scores of arrests in several countries.

President Martin Torrijos has continued in the footsteps of his predecessor, Mireya Moscoso, in supporting the U.S. in the fight against international terrorism. In January 2005, Panama sent election supervisors to Iraq as part of the International Mission for Iraqi Elections to monitor the national elections.

The Panama Canal Treaties The 1977 Panama Canal Treaties entered into force on October 1, 1979. They replaced the 1903 Hay/Bunau-Varilla Treaty between the United States and Panama (modified in 1936 and 1955), and all other U.S.-Panama agreements concerning the Panama Canal, which were in force on that date. The treaties comprise a basic treaty governing the operation and defense of the Canal from October 1, 1979 to December 31, 1999 (Panama Canal Treaty) and a treaty guaranteeing the permanent neutrality of the Canal (Neutrality Treaty).

The details of the arrangements for U.S. operation and defense of the Canal under the Panama Canal Treaty are spelled out in separate implementing agreements. The Canal Zone and its government ceased to exist when the treaties entered into force and Panama assumed jurisdiction over Canal Zone territories and functions, a process, which was finalized on December 31, 1999.

The U.S. Embassy in Panama is located at Avenida Balboa y Calle 38, Panama City (tel: 507-207-7000). Personal and official mail for the embassy and members of the mission may be sent to: U.S. Embassy Panama, Unit 0945, APO AA 34002. E-mail: sispan@pty.com

Other Contact Information American Chamber of Commerce and Industry in PanamaEstafeta BalboaApartado 168Panama, Republica de PanamaTel: 507-269-3881Fax: 507-223-3508E-mail: amcham@pan.gbm.net

U.S. Department of CommerceInternational Trade AdministrationOffice of Latin American and the Caribbean14th and Constitution, NWWashington, DC 20230Tel: 202-482-0057800-USA-TRADEFax: 202-482-0464Home Page: http://www.ita.doc.gov